Other ways of saying this are; 'hole in one' [ a golfing term] , 'that's it' or 'right on target' or 'you got that one right' or 'you aced it' These terms all mean that you have got something right, made the correct decision etc.

it's actually an idiom, not a slang. figuratively, it means: 1. to do something exactly at the right thing or to do something in the most effective and efficient way: "you've done drafting the report at the specified given time? wow! you hit the nail on the head." 2. to describe the exact cause or problem of a situation: "John hit the nail on the head when he said that what's the real problem in the society is discipline." 3. to be right about something: "my friend hit the nail on the head when she said that she can study chinese in two years." the common relevant expression I can think of is "hit the bull's-eye!" and "hit the mark!" :)

when I hear someone say "you've hit the nail on the head" I understand this as "you've said something I totally agree with that I also think is correct"